It looks to be a light sensor. The tiny circular cutout is there, for sure, dead center top bezzle, but it is not a camera (I compared closely to the MBP camera).
So, now we know for sure.
I think what you are referring to is actually the ambient light sensor.
Isn't that the ambient light sensor?
Edit:What he said...
So how come when I hold my finger over it nothing happens? And how come I didn't notice it for the first twi days I had the iPad - that one's really got me stumped - I can't look at the iPad and NOT see the hole now.
The iPad will always update the brightness after you slide to unlock. To test, cover the top of the iPad (where the sensor is) and slide to unlock, the screen should be somewhat dim which may or may not be noticeable. Next uncover the sensor and after waiting a few seconds, the brightness should increase.
The iPad will always update the brightness after you slide to unlock. To test, cover the top of the iPad (where the sensor is) and slide to unlock, the screen should be somewhat dim which may or may not be noticeable. Next uncover the sensor and after waiting a few seconds, the brightness should increase.